EARLY THIS summer, the New Jersey education commissioner's office dispatched a formal letter to local school officials in Jersey City, citing serious management problems in the district and announcing that the state would launch a thorough investigation. The reasons, outlined in an eight-page attachment, portrayed a school system in shambles:

The district had been run by four superintendents or acting superintendents in the past four years. Curriculum and materials used from fourth grade through high school had been adopted 15 to 20 years earlier, but had undergone little revision. Public funds had been used to pay parking fines and automobile repair bills for school employes, the state charged. And contractors had received millions of dollars in excess of the amounts authorized for their contract bids, according to the letter.

In short, Jersey City was put on notice: local school officials must demonstrate that they could correct their problems or the state would send someone in to do it for them. Jersey City's fate could become a model for what many say is a powerful new tool for education reform -- state intervention in local school districts that are failing.

If Jersey City fails to improve, the state under current law can send in agents to help run the local schools. But under a much more drastic mechanism proposed by New Jersey Gov. Thomas H. Kean (R), the state -- when a district fails to correct serious problems in a multi-year monitoring process -- could remove the superintendent, school board and other administrators and replace them with state agents.

State takeover of academically "bankrupt" school districts, proposed a year ago by the National Governors' Association as a management tool of last resort, has caught the attention of governors and state schools boards, including Virginia's. It has also prompted great fear among local school officials.

A number of states already have laws allowing them to intervene in local districts suffering from serious academic or management problems, either by annexing them to neighboring districts or turning over some responsibility to a state agent. But the more radical measure of state takeover raises the stakes higher in the fundamental debate over who, ultimately, is responsible for providing effective public schools.

"It gets down to . . . the handful of usually urban districts that just continue to fail to do the job," said John Samerjan, spokesman for Kean. "The excuse that there is a lack of resources, or the kids can't learn, or that it's an appropriation of local responsibility just doesn't hold water next to the reality of these poor, often black, kids being held hostage by a system that has failed them."

New Jersey officials say they are not poised to swoop in and assume control of Jersey City. The district has months to prove it can solve its problems, and there is no assurance that Kean will succeed in securing takeover power or use it in Jersey City. The proposal was recently defeated by three votes in the state senate, but the governor has made clear his intention either to introduce it again or implement the law from the executive branch.

"We do not believe today," said Walter J. McCarroll, assistant New Jersey education commissioner, "that we have sufficient authority to do the kinds of things that must be done. In order to make a difference in these very troubled districts, you have to have total control of the situation."

But Jersey City educators, like local officials elsewhere, object strongly to the proposal. The New Jersey takeover effort is "wrongheaded," said Jersey City Superintendent Franklin L. Williams, and targeted unfairly at urban districts, which are often poor and predominantly minority.

He said the Jersey City schools are improving, both academically and administratively. "What urban districts require if they are to achieve parity with suburban districts is adequate and equitable state funding," he said in a statement released by an aide.

THE IDEA of state takeovers, particularly when districts are declared "academically bankrupt," caught fire in the late summer last year when it was recommended by the governors' association in a highly publicized education improvement plan. It was to be used, according to the recommendation, only as a last resort after the state had provided extensive technical assistance. But states have been slow to embrace such legislation, raising the question of whether the idea is too politically troublesome to flourish around the country.

"I don't see many states with the political culture or tradition that would support the state coming in and taking over," said Michael Kirst, professor of education at Stanford University. "There's not the expectation that the state has the capacity to come in and do it any better."

But Kirst added that the thinking on state power and responsibility has "hardened" over the past 15 years, with states ready to assume responsibilities previously considered only in the local domain. As a result, the idea of takeovers, he said, "is in the air now, with more states thinking about it than ever before."

Terry Peterson, who as an aide to former South Carolina Gov. Richard W. Riley (D) was active in establishing a state intervention plan there, argues that takeover is "an issue that is going to take time. What people are probably looking for is a fair approach that has teeth to it, but one that doesn't lose local involvement. It's not easy to do all three."

The reluctance of district officials to relinquish what has been a strong tradition of local control in education is the strongest impediment to adoption. "It's a usurpation of local representative government," said Thomas Shannon, executive director of the National School Boards Association. He raises a second concern about the idea -- state education officials have no experience in running school systems. "What state department of education has a panel of people ready to swoop into a given district and do what district administrators are supposed to do?" asked Shannon. "It's political gimmickry."

According to a survey by the governors' association, 15 states have laws allowing them to withhold funds from local districts, either because of academic failures or other problems, such as exceeding class-size requirements or violating safety codes. Four states have policies allowing them to intervene if districts are in fiscal trouble. Nine states allow takeover or annexation of academically deficient systems by other local districts, according to the survey.

In South Carolina, for example, a 1984 law allows the state superintendent to declare the office of district superintendent vacant if the school system does not improve after failing to meet minimum standards on student test scores, drop-out rates, teacher attendance and other criteria. The Virginia board of education has taken a preliminary vote to request the state legislature to study the issue.

In New Jersey, where the state has had some intervention power for several years, the debate over takeover has been politically volatile, pitting home-rule advocates, teachers and other local educators against the state. Superintendent T. Josiha Haig, whose East Orange, N.J., school system was placed under the fiscal control of a state monitor in 1985, argues that existing laws are sufficient. When a state agent was given veto power over local financial decisions in his district, the coordinated effort helped pull his district out of immense fiscal trouble. The removal of local officials, on the other hand, is unnecessary and unfair to the financially strapped urban districts, he said. "The existing model has worked well."

McCarroll, despite his strong support for New Jersey's takeover proposal, said the measure should not be widely embraced without careful thought. "Local officials . . . should seriously question the effort on the part of any agency to take over," he said. "When you can make the case that everything has been tried, and this is a last resort, then it is absolutely justified."

Barbara Vobejda covers education for the National staff of The Washington Post.